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Agenda Item Review Form
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Muskegon City Commission
Commission Meeting Date: January 12, 2021 Title: Hartford Terrace Development
Agreement
Submitted By: LeighAnn Mikesell Department: Development Services
Brief Summary: Staff is seeking approval of the development agreement and associated PILOT
and municipal services agreements with the Muskegon Housing Commission.
Detailed Summary: The proposed agreement is based on Low Income Housing Tax Credits being
awarded by the Michigan State Housing Development Authority for work at Hartford Terrace. If the
LIHTC is not awarded by March 31, 2022, the agreement is voided . The proposed PILOT rate is 2% of
contract rents with a municipal services fee of an additional 2% of contract rents. The city can expect
to more than double the annual payment received from this development.
Hartford Terrace serves some of the most vulnerable of our city's population, including elderly, persons
with disabilities, and those making 30% or less of the area median income. The developer is planning
to invest $18,000,000 into the property including major building systems, elevators, apartment
interiors, common areas, windows, and sitework. Ten of the existing 160 apartments are currently
accessible, and the renovation will add another 6 accessible units.
Amount Requested: None Amount Budgeted: None
Fund(s) or Account(s): N/A Fund(s) or Account(s): N/A
Recommended Motion: to approve the development agreement and associated PILOT and
municipal services fee agreements with the Muskegon Housing Commission .
Check if the following Departments need to approve the item first:
Police Dept. D
Fire Dept. D
IT Dept. □
For City Clerk Use Only:
Commission Action :
DEVELOPMENT AGREEMENT
This Agreement between HARTFORD TERRACE LIMITED DIVIDEND HOUSING
ASSOCIATION LIMITED PARTNERSHIP, 1080 Hartford Street, Muskegon, Michigan,
("Hartford LDHA"), and MUSKEGON HOUSING COMMISION, 1080 Hartford, Muskegon,
Michigan ("MHC") (Hartford LDHA and MHC are jointly referred to as "Developer") and CITY
OF MUSKEGON, 933 Terrace Street, Muskegon, Michigan ("City") is made pursuant to the
following terms:
Background
A. MHC was a department of City. The City owned Hartford Terrace, a housing
development located at 1080 Hartford Street in Muskegon, Michigan for persons with
an annual income ofless than 30% of the county's average medium income at the
time of initial occupancy and are either elderly or have a disability ("Hartford
Te1Tace"), and a scattered site housing program. MHC operated Hartford Terrace, the
scattered site housing project and Section 8 housing vouchers, which was a program
to pay private landlords to rent prope1iies to eligible individuals at below market rate.
B. With adoption of Public Act 338 of 1996, being MCL Section 125.661a, MHC
became a separate legal entity and real property owned by City and managed by
MHC was transferred to MHC. Contemporaneous with the separation, the City and
MHC entered into an agreement whereby MHC would pay an annual service fee
equal to 10% of "annual shelter rents" to the City, which included rents from both
Haiiford Terrace and the scattered sites.
C. All of the above referenced programs are funded, at least in paii, by the US
Depaiiment of Housing and Urban Development ("HUD"). HUD is proposing to
have the MHC conve1i Haiiford Te1Tace from a grant funded housing project to a
Section 8 rental subsidy in the form of project based vouchers, through the federal
Rental Assistance Demonstration ("RAD") process.
D. As part of the current proposed RAD transition, MHC has applied to the Michigan
State Housing Development Authority ("MSHDA") for federal Low Income Housing
Tax Credits ("LIHTC"). The rehabilitation, through securing and investment in the
LIHTC, will result in approximately an $18 million investment in Hartford Ten-ace.
E. Contingent upon MSHDA awarding approximately $1,440,000.00 in LIHTC, the
current Muskegon City Code Section 18-83 and agreement to pay an annual service
fee shall be limited to assets held by MHC, but specifically excluding Hartford
Terrace.
F. Contingent upon MSHDA awarding approximately $1,440,000.00 in LIHTC to
Hartford LDHA, a Contract for Housing Exemption Agreement ("PILOT") and a
Municipal Services Agreement between Haiiford LDHA and City shall become
effective.
Now, therefore, for good and valuable consideration, the paiiies agree as follows:
1. City shall amend Muskegon Code Section 18-83 to exclude Hartford Terrace from the
annual service fee. The Amendment shall become effective only after MSHDA awards
approximately $1,440,000.00 in LIHTC. If such award is not made March 31, 2022, the
ordinance amendment shall be voided nunc pro tune. A form of the ordinance
amendment is attached as Exhibit 1.
2. City and Developer shall execute a PILOT Agreement, which shall become effective only
after MSHDA awards approximately $1,440,000.00 in LIHTC to Hartford LDHA. If
such award is not made by March 31, 2022, the PILOT Agreement shall be voided. The
PILOT Agreement shall require an annual payment of 2% of "contract rents" less
"utilities". "Contract rents" and "Utilities" shall be defined as provided in Muskegon
Code Section 82-46 in effect as of January 1, 2021. A form of the PILOT Agreement is
attached as Exhibit 2.
3. City and Developer shall execute a Municipal Services Agreement. The Municipal
Services Agreement shall become effective only after MSHDA awards approximately
$1,440,000.00 in LIHTC to Haiiford LDHA. The Municipal Services Agreement shall
require an annual payment of 2% of "contract rents" less "utilities". "Contract rents" and
"utilities" shall be defined as provided in Muskegon Code Section 82-46 in effect as of
January 1, 2021. A form of the Municipal Services Agreement is attached as Exhibit 3.
4. If MSHDA does not award approximately $1,440,000.00 in LIHTC to Haiiford LDHA
by March 31, 2022, this Development Agreement shall be terminated and any obligations
pursuant to this Agreement shall be null and void.
IN WITNESS WHEREOF, the parties have signed this Agreement on the dates indicated
below.
Dated: _ _ \~/_'J_f
-- __ ,2021 By: L..~'ld-~;,j!Y_~~~:::::::::=-
Stephen J. awr , Mayor
Dated: \) d' cy ,2021
- - - - - - - ' - -- - - B~ ~ " ' ~~"~
Ann Marie Meisch, Clerk
~~_]'
HARTFORD TERRACE LIMITED DIVIDEND
HOUSING ASSOCIATION LIMITED
PAR SHIP
Dated: _ _ _\~} _d'_f__ , 2021
MUSKEGON HOUSING COMMISSION
Dated: _ ___,\1'----d'_Cf
__, 2021 Orv_~~
Dated: - - - - ct- °J
\ /, - - - - 2021 ,
EXHIBIT 1
PROPOSED ORDINANCE AMENDMENT
EXHIBIT 2
PROPOSED PAYMENT OIN LIEU TO TAXES
EXHIBT3
PROPOSED MUNICIPAL SERVICE AGREEMENT
CITY OF MUSKEGON
CONTRACT FOR HOUSING EXEMPTION
This Agreement between HARTFORD TERRACE LIMITED DIVIDEND HOUSING
ASSOCIATION LIMITED PARTNERSHIP, 1080 Hartford Street, Muskegon Michigan,
("Hartford LDHA"), and MUSKEGON HOUSING COMMISION, 1080 Ha1iford, Muskegon,
Michigan ("MHC") (Hartford LDHA and MHC are jointly referred to as "Developer") and CITY
OF MUSKEGON, 933 Terrace Street, Muskegon, Michigan ("City") is made pursuant to the
following terms
RECITALS
A. The City has adopted Chapter 82, A1iicle II "Taxation" of the City Code of
Ordinances, providing for tax exemption (the "Ordinance").
B. It is acknowledged that it is a proper public purpose of the State of Michigan and
its political subdivisions to provide housing for its low income persons and families and to
encourage the development of such housing by providing for a service charge in lieu of property
taxes in accordance with the Act. The City is authorized by this Act to establish or change the
service charge to be paid in lieu of taxes by any or all classes of housing exempt from taxation
under this Act at any amount it chooses, not to exceed the taxes that would be paid but for this Act.
It is further acknowledged that such housing for low income persons and families is a public
necessity, and as the City will be benefited and improved by such housing, the encouragement of
the same by providing real estate tax exemption for such housing is a valid public purpose. It is
further acknowledged that the continuance of the provisions of this Ordinance for tax exemption
and the service charge in lieu of all ad valorem taxes during the period contemplated in this
Ordinance are essential to the determination of economic feasibility of the housing projects that is
constructed or rehabilitated with financing extended in reliance on such tax exemption.
C. MHC is the owner of Hmiford Terrace, located at 1080 Hartford, Muskegon,
Michigan, and operates Hartford Terrace as a housing project for households with an annual
income ofless than 30% of the county's average medium income and are either elderly or have a
disability, at the time of their initial occupancy (the "Project").
D. MHC has fo1med Hartford Terrace Limited Dividend Housing Association Limited
Partnership, of which MHC is the sole member of the General Pminer, and has entered into an
agreement to function as manager of the Project.
E. The City encourages rehabilitation of Hartford Terrace, which is to be funded by
Low Income Tax Credits ("LIHTC") awarded by the Michigan State Housing Development
Authority ("Authority").
F. To further enable and encourage the construction of the Project, the Developer,
MHC and the City enter into this Agreement.
G. The legal description of the Project is set forth in Exhibit A attached to this
Agreement.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. Grant of Exemption. As contemplated and pursuant to Act 346 of the Public Acts
of 1966, being MCL Section 125.1415a, as amended, (the "Act"), the City hereby grants an
exemption from all ad valorem property taxes attributable to the Project which consist of rental
units offered to eligible low income persons and families as defined by the Authority.
2. Term of Exemption. This exemption shall continue for the period of time the
housing units remain subject to income and rent restrictions pursuant to Section 42 of Internal
Revenue Service Codes of 1986, as amended (IRS Codes), or the Authority Regulatory Agreement
not to exceed 25years. The City agrees to be contractually bound by this Agreement to honor the
exemption status of the proposed Project as provided herein and in this Agreement for the entire
period during which the Project is financed by the Authority or receives low income housing tax
credits under Section 42 of the IRS Codes, provided that the said loan or a loan originally financed
by the LIHTC continues outstanding and not in default as more particularly set forth in Section
82-50(3)of the Ordinance, not to exceed 25 years.
3. Responsibilities of the Developer. The Developer agrees to perform the following:
3 .1 The Developer shall pay the service charge and payment in lieu of taxes on
or before July 1, of each year during the time the exemption is in effect. The service
charge shall equal two percent (2%) of the Contract Rents less Utilities, as defined in the
Ordinance, for the total of all units in the Project, whether the units are occupied or not and
whether or not the rents are paid.
3 .2 The Developer agrees to file all information required by the Ordinance and
fmiher to meet its obligations to the Authority in connection with the Authority's
administration of the LIHTC program.
3.3 In lieu of the requirement to submit a statement of contract rents within 30
days after December 31, as required by the Ordinance, Developer shall submit an annual
audit by April 1st . If not timely filed, and 30 days after notice to Developer of said
delinquency, a penalty of 1.25% of the service charge shall be imposed. This penalty shall
be collectible in the same manner provided in Section 82-54 of the Ordinance.
4. Term. This Agreement shall continue in effect for the entire period of eligibility
for the exemption as set fmih in the Ordinance, not to exceed 25 years.
5. Interpretation of Financing. The City agrees that the use of LIHTC constitutes
financing of the loan by the Authority in fulfillment of the requirements of Section 82-50(3) of the
Ordinance.
6. Third Party Beneficiary. This Agreement shall benefit the parties named and
further shall benefit the Authority, or such other mortgagee as may have financed the Project,
which may enforce this Agreement, both as its interest may appear, and on behalf of the Developer
and its successors and assigns. No other party is a beneficiary of this Agreement.
7. Limitation on the Payment of Annual Service Charge. Notwithstanding Section 3,
the service charge to be paid each year in lieu of taxes for the part of the Project that is tax exempt
but which is occupied by other than low income persons or families shall be equal to the full
amount of the taxes which would be paid on that portion of the Project if the Project were not tax
exempt.
8. Counterparts. This Agreement may be executed in several counterparts and an
executed copy hereof may be relied upon as an original.
9. Binding and Benefit. This Agreement shall be binding upon and inure to the benefit
of the pmiies hereto and their respective heirs, administrators, personal representatives, successors
and assigns.
10. Effective Date. The effective date of this Agreement is the date that the Authority
awards Developer approximately $1,440,000.00 in LIHTC to be used for rehabilitation ofHmiford
Terrace.
11. Severability. The various sections and provisions of this Agreement shall be
deemed to be severable, and should any section or provision of this Agreement be declared by any
court of competent jurisdiction to be unconstitutional or invalid the same shall not affect the
validity of this Agreement as a whole or any section or provision of this Agreement, other than the
section or provision so declared to be unconstitutional or invalid.
12. Inconsistent Ordinances. All ordinances or parts of ordinances inconsistent or in
conflict with the provisions of this Agreement are of no effect to the extent of such inconsistency
or conflict.
13. Choice of Law; Venue. This Agreement is executed in accordance with, shall be
governed by, and construed and interpreted in accordance with the laws of the State of Michigan.
The pmiies agree that for purposes of any dispute in connection with this Agreement, the
Muskegon County Circuit Cami shall have exclusive personal and subject matter jurisdiction and
venue.
IN WITNESS WHEREOF, the parties have signed this Agreement on the dates indicated
below.
Dated: _ _t-1-/---...:J-
:....__9,____, 2021 By: ~ :........::.~~~U--- ~ ~ ~__i__
Stephen J.
Dated: _ _l l_o_~__, 2021 By~)-----
~~
Ann Marie Meisch, Clerk
~ ~
HARTFORD TERRACE LIMITED DIVIDEND
HOUSING ASSOCIATION LIMITED
PAR SHIP
Dated: - l/'J-°f
-1,~ ~ ~ - - - 2021 ,
MUSKEGON HOUSING COMMISSION
Dated: _ _l~/_
J_°/___, 2021
Dated: _ \_/~
d-f- --' 2021
MUNICIPAL SERVICES AGREEMENT
This Agreement between HARTFORD TERRACE LIMITED DIVIDEND HOUSING
ASSOCIATION LIMITED PARTNERSHIP, ("Hartford LDHA"), 1080 Hmiford Street,
Muskegon, Michigan and MUSKEGON HOUSING COMMISION, 1080 Hartford, Muskegon,
Michigan ("MHC") (Hartford LDHA and MHC are jointly referred to as "Developer") and CITY
OF MUSKEGON, 933 Terrace Street, Muskegon, Michigan ("City") is made pursuant to the
following terms:
Background
A. Upon the Michigan State Housing Development Authority ("Authority") awarding
approximately $1,440,000.00 in federal Low Income Housing Tax Credits ("LIHTC")
to Hartford LDHA and/or MHC, this Municipal Services Agreement between
Hmiford LDHA, MHC and City shall become effective.
B. If the Authority does not award approximately $1,440,000.00 in LIHTC's to Hmiford
LDHA and/or MHC by March31, 2022, this Agreement shall be deemed void,
without any notice.
C. MHC is the owner of Hartford Terrace, located at 1080 Hmiford, Muskegon,
Michigan, and operates Hmiford Terrace as a housing development for households
with an annual income of less than 30% of the county's average medium income and
are either elderly or have a disability, at the time of their initial occupancy (the
"Project").
D. MHC has formed Hartford Terrace Limited Dividend Housing Association Limited
Partnership, of which MHC is the sole member of the General Partner, and has
entered into an agreement to function as manager of the Project.
E. The City encourages rehabilitation of Hartford Terrace, which is to be funded by
LIHTC awarded by the Authority.
F. To further enable and encourage the construction of the Project, Developer and the City
enter into this Agreement.
G. The legal description of the Project is set forth in Exhibit A attached to this
Agreement
Now, therefore, for good and valuable consideration, the parties agree as follows:
1. In lieu of the City's requirement that MHC pay annual service fee of 10% of"annual
shelter rents" at Hartford Terrace pursuant to Muskegon Code Section 18-83, Developer
shall pay to City a Municipal Services Fee of 2% of "Contract Rents" less "Utilities"
from Hartford Terrace, as defined in Chapter 82, Article II "Taxation" of the City Code
of Ordinances, providing for tax exemption (the "Ordinance"), Section 82-46. The
Municipal Services Fee is to partially compensate City for essential services such as
police and fire protection.
2. The obligation to pay the Municipal Services Fee shall commence upon the Authority
awarding approximately $1,440,000.00 in LIHTC to Hartford LDHA and/or MHC, but if
not awarded by March 31, 2022 this Agreement, with no additional action necessary,
shall be terminated.
a. The Developer agrees to file all information required by the Ordinance and further
to meet its obligations to the Authority in connection with the Authority's
administration of the LIHTC program.
b. In lieu of the requirement to submit a statement of Contract Rents within 30 days
after December 31, as required by the Ordinance, Developer shall submit an annual
audit by April 1st . If not timely filed, and 30 days after notice to Developer of said
delinquency, a penalty of 1.25% of the service charge shall be imposed.
3. Te1m. This Agreement shall continue in effect for the entire period of eligibility for the
exemption as set forth in the Ordinance, not to exceed 25 years.
4. Third Party Beneficiary. This Agreement shall benefit the parties named, or such other
mortgagee as may have financed the Project, which may enforce this Agreement, both as
its interest may appear, and on behalf of the Developer and its successors and assigns. No
other paiiy is a beneficiary of this Agreement.
5. Counterparts. This Agreement may be executed in several counterparts and an executed
copy hereof may be relied upon as an original.
6. Binding and Benefit. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, administrators, personal representatives,
successors and assigns.
7. Severability. The various sections and provisions of this Agreement shall be deemed to be
severable, and should any section or provision of this Agreement be declared by any comi
of competent jurisdiction to be unconstitutional or invalid the same shall not affect the
validity of this Agreement as a whole or any section or provision of this Agreement, other
than the section or provision so declared to be unconstitutional or invalid.
8. Inconsistent Ordinances. All ordinances or paiis of ordinances inconsistent or in conflict
with the provisions of this Agreement are of no effect to the extent of such inconsistency
or conflict.
9. Choice of Law; Venue. This Agreement is executed in accordance with, shall be
governed by, and construed and interpreted in accordance with the laws of the State of
Michigan. The parties agree that for purposes of any dispute in connection with this
Agreement, the Muskegon County Circuit Court shall have exclusive personal and
subject matter jurisdiction and venue.
IN WITNESS WHEREOF, the parties have signed this Agreement on the dates indicated
below.
Dated: _ _\ t/------=-~-q
_ _ , 2021 By: iii/~
CIT~ OF M~ KEG?J1 /
Stephen.Jaw~ ,Mayor
Dated: - ~\{
,___d-_1___ , 2021 By:~ ~ ~~~~
Ann Marie Meisch, Clerk
HARTFORD TERRACE LIMITED DIVIDEND
HOUSING ASSOCIATION LIMITED
Dated: l:}__1 , 2021
PA~
By:
~
~ ,)
Angeiaayea{;x, Its Authorized Agent
MUSKEGON HOUSING COMMISSION
Dated: \) a9 , 2021 By @7u._ff0 ~
Oneal 7.ailey, Its PreSdenl
Dated: \/aq , 2021 By: &__,
Angela